Are E. HAAS, Plaintiff,
Leon V. HAAS, General Motors Corporation, a corporation of the State of Delaware and Grace Haas, Defendants. Central Bank and Trust Company, a banking corporation of the State of Florida, Intervening Defendant.
Action for registration of certain shares of a corporation's stock in names of plaintiff and her husband as joint tenants. A Florida bank, with which husband pledged stock certificates as security for note, intervened and deposited certificates in court. The Court of Chancery, Seitz, Chancellor, held that bank's pleading stated a claim entitling it to protection granted bona fide purchasers for value as holder of equitable lien on certificates in amount of purchase price thereof, which it returned to its broker after corporation's refusal to transfer certificates to purchaser thereof from broker as bank's agent because of restraining order against sale thereof.
Order overruling plaintiff's defense that intervening bank's pleading stated no claim.
[35 Del.Ch. 394] Thomas Herlihy, Jr., and Herman Cohen, Wilmington, for plaintiff.
Caleb S. Layton (of Richards, Layton & Finger), Wilmington, for defendant General Motors Corp.
James R. Morford (of Morford & Bennethum), Wilmington, for intervening defendant.
Leon V. Haas and Grace Haas failed to appear and default judgments were entered against them.
On February 17, 1955, plaintiff instituted this action against her husband, Leon Haas (‘ Leon’ ) and General Motors Corporation. Her complaint showed that until November 1949, certificates for 200 shares of General Motors Corporation stock were registered in the names of plaintiff and her husband as joint tenants with right of survivorship and not as tenants in common. In November 1949, at the request of Leon, plaintiff endorsed such stock certificates so that Leon might deposit them with Equitable Trust Company, Wilmington, as collateral security for a loan. When the loan was paid and the certificates returned to Leon, he fraudulently had them transferred on the books of General Motors to his own name alone. She prayed that the two certificates, each for 100 [35 Del.Ch. 395] shares of General Motors stock, registered in Leon's name alone, be re-registered as before. On the same date a restraining order was issued preventing Leon and General Motors from transferring the shares. However, the Court did not then obtain actual control of the certificates.
A default judgment was subsequently entered against Leon and against Grace Haas, his sister, determining that-as between plaintiff and these parties at least-the certificates should be re-registered as plaintiff requested. However, Central Bank and Trust Company (‘ Bank’ ), a Florida bank, was subsequently granted leave to intervene and assert a claim because the certificates for the 200 shares of General Motors stock were in its possession. It deposited the certificates in this Court.
This brings us to a statement of the Bank's connection with the two certificates and its claim, the sufficiency of which is here being decided. I should say that the parties have made it extremely difficult to state the Bank's claim precisely because they have filed so many papers. I shall expect counsel to advise me if they feel that my statement of facts exceeds the necessities of the present determination.
On May 12, 1954, Leon borrowed $10,000 from the Bank represented by a demand note. He pledged as partial collateral security (later constituting the only collateral) certificates for 200 shares of General Motors stock. The parties agree that these were the same shares which he had theretofore fraudulently caused to be transferred to his own name. The certificates bore an assignment to Grace or Leon Haas. Because of this assignment (never registered with General Motors) the Bank required both parties to sign the note and submit separate blank stock powers for each certificate with signatures guaranteed by a responsible bank. These conditions were met. The demand note contained the usual provisions including a power to sell any and all of the pledged collateral upon default.
Leon became in default and the Bank made demand for payment of both principal and unpaid interest. On March 25, 1955, the date of the Bank's last demand, and after the date of the restraining order, [35 Del.Ch. 396] Leon directed the Bank to sell the entire 200 shares of General Motors stock. The written direction by Leon to the Bank reads as follows:
‘ Acting upon my own initiative and own suggestions I hereby request you to enter my order to SELL for my account and risk, on street or exchange subject to the rules and regulations of the exchange in which this order is placed, the securities listed below ...